Travel Reference
In-Depth Information
26
Pricing as a strategic
marketing tool
Anita Fernandez-Young
Introduction
We always discuss pricing as one element in the marketing mix, but this is misleading; it is
perfectly possible to use pricing in this way, and if you are considering your marketing mix from
a strategic point of view you will naturally consider how your pricing strategy contributes to
this, but because of the special nature of pricing for all businesses it can be regarded as unique
within the mix. If the pricing strategy is not considered within the overall fi nancial strategy of
the business there is a possibility that the business will not meet its costs and may not make a
profi t. When setting prices, the fundamental requirement is to cover costs and then achieve some
level of profi t which will enable the business to continue and, if possible, proceed to growth.
If this is not done, the business will not be viable and however clever the marketing mix might
look, it will fail. One of the diffi culties for authors of textbooks on tourism marketing is this very
primacy of pricing for the business: focusing on marketing collaboratively, for instance, neglects
the realities of market price sensitivities (Fyall and Garrod 2005) or suggesting that there are
three or four basic approaches to pricing (premium, value for money, 'cheap' pricing, for instance)
when the industry crosses many sectors where these concepts are not helpful (Holloway 2004;
Cooper 2008) is crude and limiting.
Given this recognition of the importance of pricing, we must consider whether there is
anything about tourism businesses which renders them particularly vulnerable to errors in price-
setting. Two apparently contradictory infl uences combine in tourism: on the one hand, nobody
enters the tourism industry in any sector with the intention of making a quick profi t. Whichever
sector we consider, whether it is transport, accommodation, hospitality or attractions, the product
or service to be consumed is an experience good and the business providing it must develop and
sustain its reputation over a period of time. On the other hand, the industry is very volatile
and dynamic; dramatic changes take place in the products available, in the economic, social and
political environment in which they are offered, and in the consumption patterns of world-
wide consumers. Wars and other sources of political confl ict make some previously attractive
destinations closed to tourism; outbreaks of disease create temporary problems; once fashionable
destinations lose popularity because the smart set have decided to go elsewhere; fl uctuations in
the exchange rates between currencies infl uence holiday choices. Given these issues, it is evident
